Monday, 28 May 2012

Safaricom, mPesa and business method patents: another view

Victor Nzomo's IPKenya blog has attracted a good deal of interest, as have his Tweets at @IPKenya here. In this Afro-IP post, Isaac Rutenberg takes the opportunity to draw attention to one of Victor's posts and, in so doing, to make a response to it. Isaac writes:

"Recently a post appeared (here) on the highly excellent blog IPKenya, to which I would like to respond. As background, I am a US patent lawyer now living and working in Kenya.

IPKenya comments on a story in Kenya’s Business Daily (here). Safaricom is being sued by the creator of M-Pesa for theft of his idea/invention. No patent was ever filed in Kenya, and none would have issued because Kenya does not allow business method patents or software patents. IPKenya wonders why the Safaricom suit has been referred to the Industrial Property Tribunal. This is an excellent question, and I suspect the case would not stay at the Tribunal for long. An appeal against the lower court’s ruling of lack of jurisdiction should properly be granted.

IPKenya argues that "the industrial property law must be re-examined in light of this mPesa case with the possibility of allowing grants of patents to be issued for business methods.” On this point I strongly disagree.

Having been involved in drafting business method patents, I can report that they are a tragic misuse of the patent system. I can make a very strong case for allowing patent protection of, say, pharmaceuticals or medical devices. I cannot think of any good arguments for allowing software or business method patents. They stifle innovation but, in the end, actually provide little protection for the patentee. They cause entrepreneurs to spend money and time on something relatively unimportant (getting patent protection) at the expense of what is truly important (building a brand name and a customer base).

In the case of mPesa, Kenya is FAR better off without Safaricom having a monopoly on the technology. Safaricom still makes money on mPesa, primarily because they were first to the market and they have a very large customer base. People use mPesa because it is widely accepted and trusted, not because it is the only service available. In fact, the creation and existence of similar services from other mobile carriers has, arguably, caused Safaricom to continue innovating and providing an improved service. This would not have happened had the process been patented.

I have never met a software designer or web developer in the US in favour of such patents, and most say that they hate them. The only people I know who like these patents are the lawyers who write them. I wish that the US would follow the Kenyan system, and not allow software and business method patents. I sincerely hope that they do not change the Kenyan patent law to allow them!

One final note. IPKenya identifies awareness creation as a pivotal role for KIPI and KECOBO (Kenya’s patent and copyright offices, respectively). I have been involved with KIPI and know that they are working hard to educate ordinary citizens, business people, universities, etc. KECOBO is doing the same. Much work has been done, but IPKenya is absolutely right - much more needs to be done. Thank you IPKenya for your work in this area!".

Afro Leo wonders how many practitioners and software designers share or dissent from Isaac's views. If you are one such person, do let us know!

5 comments:

First and foremost, thank you Jeremy and Isaac for engaging with me on this debate over business methods patents. I'm relatively new to the world of IP and I look forward to learning more from both of you via the blog and twitter.

My contention:

At the risk of sounding like a naive simpleton, I would argue that it makes no sense to deny Kenyans the right to get IP protection for business methods especially if it meets the rigorous 3-step patentability test. Although Isaac suggests that business methods patents are unpopular in the US, the US patent system still provides IP protection for them, along with a host of other commonwealth jurisdictions.

Meanwhile, back to Kenya, there's no question that we are on the forefront of mobile technology solutions with mPesa being the stand-out example. It won't be too long before some other innovative Kenyan comes up with another way of using mobile technology in doing business that will completely overshadow mPesa. Shouldn't that innovator benefit from patent protection?

I enthusiastically encourage Kenyans to get patents in the US and other jurisdictions. Although I think business method patents are harmful to the US market, I hope that many Kenyans will try (successfully) to get such patents in the US when their invention warrants it. I sincerely hope that the "next" mPesa is developed in Kenya and is patented everywhere possible so that Kenyans can reap the benefits of investment from other countries.

I do NOT, however, think that Kenya should adopt the policy of allowing such patents here. As stated in my blog post it is bad for innovation, provides little protection, and distracts from more important matters of entrepreneurship (at least in ICT).

Almost everyday in the office and in every IP forum I attend in Kenya I get asked the question whether Safaricom has patented the MPESA technology. In response, I normally ask the question, what exactly is MPESA? The answer I get is normally about how the MPESA idea has revolutionized money transfer services and ease of doing business in Kenya.

While I totally agree that the MPESA phenomenon is a revolutionary and highly successful business model (in Kenya), from my (and a patenting point of ) view, MPESA is primarily an account, just like any other bank account hosted in a server and where the appropriate software in the mobile phone performs the transaction/procedure of debiting and crediting from one account to another.

When you get into the nitty-gritty of patent protection, a relevant and appropriate question is whether the MPESA transaction (i.e. transferring money from one account to another) would pass the inventive step/non-obviousness test in light of available prior art technologies such as the ATM, internet banking and other money transfer services?

Whether Kenya should change the law to allow patenting of business method because the US and other countries do so, it should be observed that the scope of business method protection in those countries is highly contentious - considering court decisions, the likes of the Bilski in US and Aerotel/ Macrossan in UK. However, it has also been observed that patents relating to business methods have been granted in countries where the law does not allow patenting of business methods as such. Experienced patent drafters are also known to employ drafting techniques that overcome the business method objection in patent claims.

I do agree with Dr. Isaac that even without a MPESA patent, Safaricom still makes tonnes of money.

Business Daily reported that, "Mr Christopher Ondieki sued the mobile provider three years ago saying he invented M-Pesa’s upgraded technology".In fact this self-same excellent blog ;-) reported in December 2008 that "The dispute concerns M-Pesa’s upgraded technology [my emphasis] which allows users to transfer money in US dollars and Kenya shillings and to also transfer money to and from banks accounts - a technology which Mr. Ondieki claims to have invented"(Safaricom sued over money transfer technology) [sourced from the Nation].

So was this 'upgraded technology' and was there an inventive step if it was only an upgrade; or was this a business method?Can anyone enlighten us on what exactly he claims to have invented?

If one reads the report in The Standard of 17th December 2008 that, "The applicant says Safaricom Ltd requested him on or about April 8, for a proposal to upgrade the quick cash system" one might begin to wonder if this is not a contractual dispute, more than an IPR one.

I have even read a reference going as far as, "Mr. Christopher Ondieki, the intellectual owner of the Mobile-Pesa service ...".

Hmmm. For those unfamiliar with the history of M-PESA, Vodafone wanted a system to transfer money using mobile phones. It outsourced the development work to a small company in Cambridge, UK, called Sapentia (interesting company). Tthe development work was jointly funded by Vodafone and the UK's Department for International Development (DfID). Vodafone Money Transfer was born, and licensed to Safaricom (in which Vodafone had acquired a 40% stake in 2000).Vodafone Money Transfer is branded differently in other countries, e.g. in Afghanistan it is M-Paisa and operated by Roshan. (I stand to be corrected on details in this account).Sapentia does not appear to hold any related patents, but Vodafone does. The underlying concept was not new, e.g.

Notwithstanding the claim that Safaricom solicited a proposal from Christopher Ondieki, it seems that Safaricom has had an unhappy problem with members of the public sending in their bright ideas, and the background to this is ably explored on the excellent white african blog inhttp://whiteafrican.com/2010/08/03/safaricom-innovation-board-and-the-kenya-tech-community/.

Another complication may be that M-PESA is controlled by the M-PESA Holding Company Limited, not strictly by Safaricom.

I read another writer speculating on the Ondieki case by wondering if other mobile payment solutions with different applications would appear. In Kenya we now have Google's new beba card (https://www.beba.co.ke). Google has been working hard in this field, eg Gpay and

Now that I have contributed sufficient mud and fog to the debate, I suspect we all agree on the suggestions: to continue the very good progress in education, and to people who have a bright idea - go and see an IP specialist before you tell the world about it :-)

I am rather late to this dicussion (in days) but supremely chuffed it is taking place. I come to this as a trade mark attorney but also as some with a broad interest in IP and its interraction with innovation, and particularly in developing countries.

My first observation is that MPESA has established itself as a trusted brand (so important in financial areas such as these) and as such creates a barrier to entry that is arguably more effective than a patent and more versatile. Certainly, it can be more enduring. The title deed to that brand is of course the trade mark.

But it takes time and resource to develop a brand, and in the brand development stages (not that they ever cease) patent protection would be very helpful - So often we hear of great ideas of entrepreneurs adopted by larger institutions with whom they seek to collaborate, as their own. NDA's can help but are not failsafe and rarely entered into, if at all, on equal footing.

On the question of software and business metod patents - there is so much innovation in the tech space and since copyright seems to offer little real protection I wonder whether we undermine the importance of patents by excluding them on software as a principle. Using the USA as an analogy is useful but one has to bear in mind that we are talking of a developed country where litigatig patents has developed to a business in its own right. In Kenya (and Africa) I see a case for affordable patent protection for software patents to support our tech entrepreneurs yet I do not deny that it woud need careful implementation because it could so easily do the opposite. On business methods I agree with their exclusion.